Is SAP Still in SMB Stealth Mode? Watch Out, Changes are Looming

Many think SAP is just for the big guys. The company is the closest you get in the ERP market to a household name, and, after all, it was in the large enterprise where it made that name for itself. In reality though, SAP plays in markets that include companies of all sizes. A good 80% of its customers are in the small to midsize enterprise range. And yet today small to midsize companies in search of a solution don’t immediately think “SAP” and they will have a difficult time discovering all that SAP has to offer them.

SAP’s competitors perpetuate the “big guy only” misconception, along with  “expensive” and “complex” qualifiers. They are like a dog with a bone, refusing to let go, hoping to lead prospects away from the 800-pound gorilla. Pundits who largely follow the large enterprise space contribute as well, along with the publicity (both good and bad) from high profile customers that are also household names. But SAP must also share some of the blame because of one thing it is so very good at: Speaking in one voice.

SAP employees stay on message. And the message is couched in the native language of SAP, which is the language of IT in the large enterprise. Although the latest overarching message these days is “Run Simple,” that alone doesn’t say enough. SAPers either talk at such a high level of abstraction that it becomes meaningless (your world will be a better place), or they talk technology.

In speaking to the decision makers and business leaders in small to midsize businesses (SMBs), you might as well be talking Klingon. They have their feet firmly planted on the ground. They want to hear how a solution will solve their immediate problems, address their challenges and bring value to the business. They want specifics. And they want to buy from a company they can trust.

The combination of negative hype and the “one voice” of SAP also might lead SMBs to think SAP is a one trick pony, with only a single product to offer, one that is clearly beyond their reach. Nothing could be further from the truth. Not only does SAP have three separate and distinct ERP offerings, it also has other offerings that sit on the periphery, outside the boundaries of ERP. These include talent management (SuccessFactors), travel and expense (Concur), a supplier network (Ariba), analytics (Business Objects) and a front office (SAP Anywhere). And this is just a partial list.

Let’s start with core ERP. At the top is SAP ERP, which has been brought to market under different names during its evolution. But make no mistake; this is definitely a solution that is meant to satisfy the needs of the largest, most complex enterprises in the world. Older versions were known as SAP R/2 and R/3 but more recently it was simply referred to as SAP ERP or ECC, providing the core of a larger Business Suite(adding CRM, SRM, SCM and PLM to ERP). The latest incarnation is S/4HANA, which is both evolutionary and revolutionary at the same time. It provides the same functionality as SAP ERP but has undergone a rewrite to take advantage of the powerful in-memory technology of SAP HANA. This is the large enterprise ERP for which SAP is famous (infamous?).

But this is not a “one size fits all” solution. SAP also offers SAP Business One and SAP ByDesign. Up until recently, it also marketed Business All in One, but in fact that was/is not a separate product. It was a version of SAP ERP packaged with industry templates and best practices, purportedly designed to simplify the implementation, thereby making SAP ERP more digestible for the mid-market. Because it was essentially the same product but with a different name, it also added some confusion. SAP appears to be backing away from that branding. I think that is smart. Can SAP S/4HANA work for this midmarket? The answer is yes, particularly where that smaller, midsize company is a division of a large enterprise that has standardized on SAP solutions. But these will be the exceptions to the rule.

SAP is also getting smarter about how it targets these three products to different segments. SAP has formed an SMB team to specifically address the market of companies with 1500 employees or less, and has defined “small” as companies with less than 250 employees. It will market SAP Business One to small companies looking for an on-premise or hosted solution (partners will provide the hosting). It will be sold largely through partners, which will provide both advocacy and intimacy to the customer. SAP Business ByDesign is available exclusively as a multi-tenant SaaS (software as a service) solution supported by SAP itself. The target is generally the mid-market but can come down into the small company range for those interested in a true SaaS solution from SAP.

However, both SAP Business One and SAP Business ByDesign have suffered from a lack of respect in the market. Competitors often write Business One off, telling me they hardly ever see it in a competitive deal. And yet Business One is implemented in over 50,000 small companies around the world and SAP is adding about 1,000 new customers a quarter. That tells me there are hundreds of deals where these competitors never get invited to the party.

Rumors of the death of Business ByDesign have been rampant for years and unfortunately SAP has allowed its critics to have had a louder voice in the market than SAP itself. In the meantime, SAP has been (rather quietly) growing the installed base to about 1,000 customers, which is larger than many customer bases of some of those competitors. Respected journalists and analysts have recently admitted ByDesign is in fact not dead. I couldn’t/can’t resist saying, “I told you so.”

This might all seem like SAP 101 to veteran industry observers. But it also might come as a surprise to learn that your typical decision maker and business leader of a small to midsize business doesn’t follow the (ERP) space that closely. Those business leaders are too busy following their own industries. So they are easily confused by the progression of product names and even more easily confused when target markets for different products overlap. And they are not well equipped to distinguish hype and myth from reality. To convince them one way or the other, you have to understand how they approach software selection and you have to speak their language. And you have to speak it loudly and clearly. That is where SAP has not done a good job.

I am optimistic that is about to change under some new leadership at SAP. Barry Padgett took over as President of the SMB team last July. He came over from the Concur team, bringing a new perspective. Barry “gets” SMBs. They need a lot of the same features and functions that their larger counterparts need, but they don’t have the large IT staffs or the deep pockets. They expect products to work seamlessly – open and connected. They don’t go out looking for technology. They go out looking for solutions to problems and answers to questions. They expect value. They need to see a path forward. And to connect with them, you need to be talking in terms they clearly understand.

Barry and his new CMO Mika Yamamoto (who came to SAP from Amazon) also understand how most software searches begin these days. Much of the legwork and due diligence is done before a prospect ever engages with a potential solution provider. Today an online search for solutions for SMBs does not lead directly to SAP. And even if you land on SAP’s website, there is no clear path to show you what you need or how SAP can help. So clearly SEO and website redesign is top on Mika’s priority list.

But both Barry and Mika know that it can’t end there. They must have a louder voice than their critics. And remember all those products in SAP’s portfolio that sit on the edges of a solution: talent management, supplier networks, analytics, travel and expense, eCommerce (front office)? SMBs have the same kind of needs as their larger counterparts in all of these areas. But they don’t have the internal expertise to assemble a solution that is not already seamlessly connected.

It is not enough that these edge solutions are available from SAP; they must be both affordable and integrated to SAP Business One and SAP Business ByDesign. These kinds of connections are certainly on the roadmap, but they can’t come too soon.

The Internet has leveled the playing field, allowing SMBs to participate in a growing, global market. But many won’t be able to compete effectively with their existing solutions. This opens up a world of opportunity to SMB solution providers. Look at the success SAP has had in the small to mid-market already. I am not advocating the SMB folks at SAP go off message, but I am advocating they articulate that message in a different voice. That voice needs to be loud and proud. They need to keep the dialogue going with existing customers and keep the development engines churning. While I also believe there is plenty of opportunity for all those with good, solid, technology-enabled solutions, if the new leadership team can deliver on these fronts, they will truly be a force to be reckoned with.

 

This entry was posted in Uncategorized and tagged , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *